Funding the Future Bank warns: crash ahead?
Dec 6, 2025
The Bank of England warns of a looming financial crisis with deteriorating global risks. Overvalued AI stocks resemble past bubbles, raising alarms about corporate debt linked to AI investments. Weak lending standards echo pre-2008 issues, while shadow banking emerges as a new vulnerability. Recent debt defaults illustrate contagion risks, particularly for the UK's banking sector. Additionally, the rise of climate risks and insufficient SME financing compounds systemic threats, putting households at further risk amidst these uncertainties.
AI Snips
Chapters
Transcript
Episode notes
Bank Flags Rising Global Risk
- The Bank of England warns the global risk environment has deteriorated sharply and sees increased probability of shocks.
- Overpriced AI valuations and geopolitical tensions make a sharp market correction increasingly plausible.
AI Bubble Could Trigger Credit Losses
- AI company share prices resemble dot-com bubble levels and could see ~40% falls if corrected.
- Rapidly rising corporate debt to finance AI infrastructure links a tech correction directly to credit markets.
Hidden Leverage Mirrors 2008 Risks
- Underlying corporate leverage and weak loan underwriting echo pre-2008 conditions, hidden by complex legal structures.
- Interconnected losses can hit many debt market participants simultaneously, creating systemic spillovers.